The Treasury has recently published its conclusions on how the Freedom and Choice in Pensions consultation should be taken forward. But some of the proposals are puzzling given the Government’s overall policy objectives.
I fully support the intention to provide choice for people coming to retirement. Retirement in 2014 is very different from 20 years ago when people worked for an allotted period and retired with an income based on service and salary. As more responsibility has shifted to the individual, people need more flexibility to manage the assets they have acquired. For many, retirement will be a phased process, not a one-off event.
With greater responsibility comes greater choice. Managing your finances for an unknown period, especially when not greatly adding to the assets acquired, is a complex challenge. The Government recognises that people will need more help and the guidance guarantee is designed to help them understand the choices available. But guidance will not make those choices for them. If they want support with that, they will need advice.
The Government recognises this too and has said the FCA should look at what can be done to reduce the cost of delivering advice. But we now have a proposal to ask advisers to pay for the cost of the guidance, which will, of course, increase the cost of advice.
In terms of achieving the Government’s objective, the latest report looks like shooting itself in the foot. Apfa will discuss these proposals with the Treasury to demonstrate that any levy should be equitable and proportionate to those who created the need for reform and those who will ultimately benefit from it.
Chris Hannant is director general at Apfa